Wednesday

7th Dec 2022

Germany plans withdrawal from Energy Charter Treaty

Listen to article

Germany plans to withdraw from the controversial Energy Charter Treaty, a Federal Ministries of Economics spokesperson confirmed to Investigate Europe on Wednesday (19 October).

A proposal is currently being discussed by the ministries and is expected to be completed before the end of November, when the treaty's members will decide on the adoption of the modernised Energy Charter. Germany would follow Poland, Spain and the Netherlands, which all announced in recent days that they would leave the agreement.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The Energy Charter Treaty is a little-known investment protection agreement. In the early 1990s, all EU states, including Germany, signed the treaty to protect investments in the former Soviet states. Today, there are 55 ECT signatories, mainly nations in Europe and Asia. But as research by Investigate Europe last year showed, the agreement has several problems.

The treaty is unilateral, only companies can sue states. Moreover, its wording is vague and investors can sue if they feel they are being treated "unfairly".

According to research by Investigate Europe, the treaty protects fossil infrastructure worth €344.6 billion in Europe alone. In recent years, investors have used the treaty to intimidate EU states and demand billions of euros in compensation.

The French government, for example, preemptively weakened a climate law that was supposed to ban the extraction of fossil fuels. The German energy company RWE recently sued the Netherlands for €1.4 billion because the country brought forward its coal phase-out.

For the past five years, the EU Commission has been working to reform the treaty. Completed in June this year, the Commission hailed the modernisation agreement as a success, claiming that it has "fulfilled its mandate" and "brought the ECT into line with the Paris Agreement and [the EU's] environmental objectives". But many member states see it differently.

"The mandate to the European Commission was to bring the Energy Charter Treaty in line with the Paris Climate Agreement," Dutch Energy Minister Rob Jetten told parliament in The Hague on Tuesday. Despite much progress in the negotiations, Jetten said the agreement was "not sufficiently in line" with the Paris Agreement and he announced the Netherlands would leave the agreement.

Politico reported last week that Spain would withdraw from the Energy Charter Treaty. In Poland, the government introduced a bill in August to "terminate the Energy Charter Treaty". One of the reasons given for its move was that an exit from the treaty "has the potential to significantly reduce the financial burden on the state". In early October, 418 of the 460 members of the Polish parliament voted in favour of the bill. The country's Senate now has to pass the bill.

In addition to Poland, Spain, the Netherlands and Germany, other member states could leave the Energy Charter Treaty in the near future.

In Brussels, EU member states are coordinating their approach in the Council's Energy Working Group. According to the notes of a diplomat present, a French representative expressed at the beginning of October that France "does not consider the results of the modernisation to be sufficient". This concerned above all "the adaptation to the Paris Agreement". In the worst case, existing investments in fossil fuels would continue to be protected until 2040.

But even if several member states now withdraw from the treaty, they will not get rid of the Energy Charter Treaty so easily. The authors of the treaty made provisions for this eventuality.

In Article 47, they stipulated that if a state leaves, the "provisions of this Treaty shall continue to apply for a period of 20 years". For example, the British oil company Rockhopper sued Italy for banning oil drilling in the wake of the climate crisis. Italy was the first EU country to leave the treaty in 2016. Nevertheless, arbitrators ruled in August this year that Italy must compensate Rockhopper with €190 million plus interest. The company had only invested €25 million in its drilling.

At the beginning of November, EU Member States will discuss the modernisation outcome again in the Council's Energy Working Group. The Contracting Parties must then vote on the modernisation at the Annual Energy Charter Conference on 22 November. For this to be adopted, all ECT signatories must agree.

Afterwards, the new treaty text must be implemented into national law. In the EU, member states must also approve the treaty in the Council and Parliament. Then critical member states could still delay or even block the modernised treaty. This is because the parliaments of the member states must also approve a reform.

Author bio

Nico Schmidt wrote this article for Investigate Europe. He studied cultural science in Hildesheim and Berlin. He attended the Henri-Nannen-Schule (journalism school) in Hamburg. As a freelance journalist, his articles have been published by Der Spiegel magazine, the weekly Die Zeit and Vice, among others. He was the recipient of a stipend by Robert-Bosch-Stiftung in Eastern Europe and was awarded the Grimme Online Award for the project “Werpeloh – ein deutsches Dorf”.

Analysis

The controversy behind the Energy Charter Treaty reforms

Experts from several organisations say that reform of the Energy Charter Treaty, proposed by the EU Commission, will make it difficult to meet the targets agreed in the Paris Agreement - making it an obstacle to the clean-energy transition.

Stakeholders' Highlights

  1. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal
  2. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  3. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  4. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  5. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  6. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe

Latest News

  1. EU delays Hungary funds decision, as Budapest vetoes Ukraine aid
  2. Borrell gets pension from MEP fund set for taxpayer bailout
  3. Autocrats make us all less secure
  4. Big Agri's lies: green EU farming not to blame for food insecurity
  5. German top court declares €800bn EU recovery fund 'legal'
  6. EU countries struggle to crack Hungary's vetos
  7. Frontex expanding migrant route-busting mission in Balkans
  8. EU ministers in fresh battle on joint debt, after Biden subsidies

Stakeholders' Highlights

  1. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  2. European Committee of the RegionsRe-Watch EURegions Week 2022
  3. UNESDA - Soft Drinks EuropeCall for EU action – SMEs in the beverage industry call for fairer access to recycled material
  4. Nordic Council of MinistersNordic prime ministers: “We will deepen co-operation on defence”
  5. EFBWW – EFBH – FETBBConstruction workers can check wages and working conditions in 36 countries
  6. Nordic Council of MinistersNordic and Canadian ministers join forces to combat harmful content online

Join EUobserver

Support quality EU news

Join us